It isn't surprising that many individuals are interested in how to invest in Costco Wholesale Corporation (COST -2.92%). After all, the company ranks among the biggest wholesale retailers in the world. The stock has also delivered massive gains since it began trading in 1985.
In this article, we'll explain how to buy Costco stock, the pros and cons of investing in the stock, and other key things you need to know about the giant retailer.
How to buy Costco stock
How to buy Costco stock
You can buy shares of Costco in the same manner as you invest in any stock. Here's a step-by-step guide on how to buy Costco shares.
- Open your brokerage account: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Should I invest in Costco?
Should I invest in Costco?
Whether you should invest in Costco stock is ultimately a personal decision. There are two especially important factors to consider before buying this retail stock.
One key consideration is your investing style. Costco isn't viewed as an aggressive growth stock, even though it has performed quite well in recent years.
Another thing to keep in mind is valuation. Costco stock trades at a relatively high forward price-to-earnings ratio. That's typical, though; Costco usually trades at a premium compared to the broader market. Still, investors seeking a bargain might prefer to look elsewhere.
There are several reasons to seriously consider buying shares of Costco. For example, the company has a strong business moat since it uses a membership-based model. Customers must pay an annual fee to shop in its warehouse stores ($65 for a Gold and $130 for an Executive membership). These fees generate solid recurring revenue for Costco.
The membership model has another big advantage: Customers have ample motivation to shop at Costco to get the best return on investment for their annual fees. And it clearly works, as the company's membership renewal rate is typically around 90%.
The big attraction for customers -- and one of the most important components of Costco's moat -- is its price structure. As the third-largest retailer in the world, Costco is able to negotiate low prices for the products it sells. The more members it gains, the more negotiating power it has.
To be sure, Costco has some challenges. In particular, it faces strong competition from companies like Walmart's (WMT 0.06%) Sam's Club and BJ's Wholesale Club (BJ -0.79%) that use similar business models. Costco also depends heavily on its supply chain. Any disruptions in the distribution of products to its warehouse stores can negatively affect sales.
Is Costco profitable?
Is Costco profitable?
One thing investors don't have to worry about is Costco's bottom line. The giant discount retailer remains highly profitable.
In its 2024 fiscal year, Costco reported nearly $7.4 billion in net income. Sure, the company's revenue was $254.5 billion, resulting in a net profit margin of only 2.9%. However, low profit margins aren't unusual in Costco's industry.
Revenue
Perhaps most impressive is how Costco's earnings have increased over time. And those higher profits have driven the stock higher, too.
Artificial intelligence (AI) could also help Costco continue improving its bottom line. AI is transforming the retail industry. Global consulting firm McKinsey & Company predicts that generative AI could deliver between $400 billion and $600 billion in additional value to the retail and consumer packaged goods industries.
Costco is already putting AI to work in its operation by using machine learning to track its fresh food and reduce waste.
Does it pay a dividend?
Does Costco pay a dividend?
Yes, Costco pays a dividend, though its dividend yield of less than 1% isn't very impressive. However, there are other things for investors to like about Costco's dividend program.
The company has increased its dividend for more than 20 consecutive years. Costco has also rewarded investors periodically with special dividends.
Costco should be in good shape to keep its streak of dividend hikes going. The company's dividend payout ratio stands at less than 30%, indicating significant financial flexibility to raise dividends in the future.
Special Dividend
Will the stock split?
Will Costco's stock split?
Costco's management team hasn't publicly stated that a stock split is being considered. However, it wouldn't be surprising if the company did split its stock in the not-too-distant future.
In January 2000, Costco conducted a 2-for-1 stock split. Its share price prior to the split was a little more than $91. Currently, Costco's share price is several times higher than its price back then. The company also had a 3-for-2 stock split in March 1992 and a 2-for-1 stock split in May 1991.
The bottom line
The bottom line on investing in Costco
It's easy to invest in Costco stock using an online brokerage. The stock has been a big winner over the long run. The chances Costco can keep up its winning ways appear to be good.
FAQs
Investing in Costco FAQs
Is Costco a good stock to buy?
Costco offers several key advantages. Its business model is exceptionally strong, the company is consistently profitable, and it has solid growth prospects.
The main negative for Costco is its lofty valuation, with shares trading at many times higher than forward earnings. But there's a good case to be made that the stock deserves to trade at a premium because of its track record and resilience.
How much money would you have if you had invested $1,000 in Costco 10 years ago?
In December 2014, Costco stock traded at around $138 per share. An initial investment of $1,000 would be worth nearly $8,500 as of Sept, 22, 2025, with dividends reinvested.
Will Costco stock hit $1,000?
Costco is hovering just below the $1,000 mark at the time of this article update. However, Costco stock briefly went above $1,000 in early 2025 and again in mid-2025.
